CIMB Research retains Hold call for Maybank

February 28, 2019 editor Analyst Reports, Banking

KUALA LUMPUR: CIMB Equities Research reiterates its Hold call on Maybank as it thinks that the stock is fairly valued at an FY19 P/E of 12.4 times, which is above the five-year average of 11.5 times.

On a positive note, the research house said on Wednesday Maybank’s share price was supported by an attractive projected dividend yield of 5.8% for FY19F. It retained its FY19-20F EPS forecasts and dividend discount model-based target price of RM9.85.

CIMB Research said that FY18 net profit was within expectations, accounting for 103% of its forecast and 104% of Bloomberg consensus estimate.

“However, FY18 net DPS of 57 sen was above our projected 51 sen,” it said.

The key driver for Maybank’s 9.1% on-year net profit growth in 4Q18 was the 59.3% on-year plunge in its loan loss provisioning (LLP).

With this, its credit charge-off rate fell to only 6bp in 4Q18, the lowest in the past four years. This is in line with the improvement in its gross impaired loan ratio from 2.65% at end-Sep 18 to 2.41% at end-Dec 18.

“The low LLP in 4Q18 helped the group to achieve an 18.8% drop in LLP for FY18. This was the major impetus for the group’s net profit growth of 7.9% in FY18.

“However, we are disappointed that both net and non-interest income fell by 0.6% on-year and 4% on-year, respectively,” it said.

CIMB Research said net interest income was negative, impacted by a 3bp contraction in net interest margin to 2.33% in FY18 while non-interest income was brought down by adverse investment income.

Maybank’s loan growth improved slightly from 4.5% on-year at end-Sep 18 to 4.8% on-year at end-Dec 18.

This mainly came from its Indonesian operation, which registered loan growth of 2% on-year at end-Dec 18, reversing the 4.3% on-year drop at end-Sep 18.

The loan growth in Malaysia slid from 4.8% on-year at end-Sep 18 to 4.4% on-year at end-Dec 18, below the industry’s pace of 5.6%.

Meanwhile, the momentum in Singapore was largely stable at circa 4.7% on-year at end-Sep 18 and end-Dec 18.

Source : TheStar